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Marc Goldwein: A better way to cut the payroll tax rate

Marc Goldwein is senior vice president and senior policy director of the Committee for a Responsible Federal Budget. He recently wrote an opinion piece for The Hill, an excerpt of which is below.

With a possible recession looming, the Trump administration is reportedly considering a temporary payroll tax holiday to boost the economy. A temporary cut to the payroll tax rate – which should only be considered if the economy deteriorates significantly – may help combat the next recession by reducing layoffs and giving workers more money to spend, as it did in 2011 and 2012.

But a better plan would be to enact a permanent cut in the payroll tax rate and to apply the employer side of the payroll tax to a broader base that includes all compensation, not just covered wages. Replacing the employer payroll tax with a compensation tax could boost both short- and long-term economic growth, making the payroll tax more efficient and progressive and helping to shore up the Social Security trust funds.